Audit of the Federal Employees Health Benefits Program Operations at Geisinger Health Plan

Below is a raw (and likely hideous) rendition of the
original report.
(PDF)

U.S. OFFICE OF PERSONNEL MANAGEMENT
OFFICE OF THE INSPECTOR GENERAL
OFFICE OF AUDITS
Final Audit Report
Subject:
Audit of the Federal Employees Health Benefits
Program Operations at Geisinger Health Plan
Report No. 1C-GG-00-13-063
May 1, 2014
Date:
-- CAUTION –
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit
report may contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG webpage, caution needs to be exercised before
releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
AUDIT REPORT
Federal Employees Health Benefits Program
Community-Rated Health Maintenance Organization
Geisinger Health Plan
Contract Number CS 2911 - Plan Code GG
Danville, Pennsylvania
Report No. 1C-GG-00-13-063 May 1, 2014
Date: ________________
Michael R. Esser
Assistant Inspector General
for Audits
-- CAUTION –
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit
report may contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG webpage, caution needs to be exercised before
releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
EXECUTIVE SUMMARY
Federal Employees Health Benefits Program
Community-Rated Health Maintenance Organization
Geisinger Health Plan
Contract Number CS 2911 - Plan Code GG
Danville, Pennsylvania
Report No. 1C-GG-00-13-063 Date: May 1, 2014
The Office of the Inspector General performed an audit of the Federal Employees Health
Benefits Program (FEHBP) operations at Geisinger Health Plan (Plan). The audit covered
contract years 2008, 2009, 2011, and 2012, and was conducted at the Plan’s office in Danville,
Pennsylvania.
This report questions $652,129 for inappropriate health benefit charges to the FEHBP in contract
years 2008, 2011, and 2012, including $48,687 for lost investment income through April 30,
2014. We found that the FEHBP rates were developed in accordance with the Office of
Personnel Management’s rules and regulations in contract year 2009.
For contract year 2008, we determined that the FEHBP rates were overstated by $146,529 due to
defective pricing. Specifically, the Plan did not apply the correct SSSG discount to the FEHBP
rates. Furthermore, the Plan applied discretionary underwriting adjustments to the FEHBP rates.
In developing our audited FEHBP rates, we applied the appropriate SSSG discount and removed
the discretionary underwriting adjustments.
For contract year 2011, we determined that the FEHBP rates were overstated by $370,374 due to
defective pricing. The Plan’s FEHBP rate development included autism and mental health parity
loadings. The costs associated with these loadings are already included in the claims experience
i
used to develop the FEHBP premium rates; therefore no additional loadings are necessary. The
Plan also applied a risk adjustment factor to the FEHBP rates which we determined was not
appropriate. In developing our audited FEHBP rates, we removed the inappropriate loadings and
risk adjustment factor.
For contract year 2012, we determined that the FEHBP rates were overstated by $86,539 due to
defective pricing. The Plan’s FEHBP rate development included autism and mental health parity
loadings. The costs associated with these loadings are already included in the claims experience
used to develop the FEHBP premium rates; therefore no additional loadings are necessary. The
Plan also applied discretionary underwriting adjustments to the FEHBP rates. In developing our
audited FEHBP rates, we removed the inappropriate loadings and the discretionary underwriting
adjustments.
Consistent with the FEHBP regulations and contract, the FEHBP is due $48,687 for lost
investment income, calculated through April 30, 2014, on the defective pricing findings. In
addition, the contracting officer should recover lost investment income on amounts due for the
period beginning May 1, 2014, until all defective pricing amounts have been returned to the
FEHBP.
ii
CONTENTS
Page
EXECUTIVE SUMMARY ................................................................................................. i
I. INTRODUCTION AND BACKGROUND ....................................................................... 1
II. OBJECTIVES, SCOPE, AND METHODOLOGY ............................................................ 3
III. AUDIT FINDINGS AND RECOMMENDATIONS ......................................................... 5
Premium Rate Review ........................................................................................................ 5
1. Defective Pricing ............................................................................................................ 5
2. Lost Investment Income.................................................................................................. 8
IV. MAJOR CONTRIBUTORS TO THIS REPORT ............................................................. 9
Exhibit A (Summary of Questioned Costs)
Exhibit B (Defective Pricing Questioned Costs)
Exhibit C (Lost Investment Income)
Appendix (Geisinger Health Plan’s February 20, 2014 response to the draft report)
I. INTRODUCTION AND BACKGROUND
Introduction
We completed an audit of the Federal Employees Health Benefits Program (FEHBP) operations
at Geisinger Health Plan (Plan). The audit covered contract years 2008, 2009, 2011 , and 2012,
and was conducted at the Plan's office in Danville, Pennsylvania. The Plan elected to paiiicipate
in the 2012 Medical Loss Ratio (MLR) Pilot Program offered to FEHBP caiTiers. The audit was
conducted pursuant to the provisions of Contrnct CS 2911; 5 U.S.C. Chapter 89; and 5 Code of
Federal Regulations (CFR) Chapter 1, Paii 890. The audit was perfo1med by the Office of
Personnel Management's (OPM) Office of the Inspector General (OIG), as established by the
Inspector General Act of 1978, as amended.
Background
The FEHBP was established by the Federal Employees Health Benefits Act (Public Law 86­
382), enacted on September 28, 1959. The FEHBP was created to provide health insurance
benefits for federal employees, annuitants, an d dependents. The FEHBP is administered by
OPM's Healthcare and Insurance Office. The provisions of the Federal Employees Health
Benefits Act ai·e implemented by OPM through regulations codified in Chapter 1, Paii 890 of
Title 5, CFR. Health insurance coverage is provided through contracts with health insurance
caITiers who provide service benefits, indemnity benefits, or comprehensive medical services.
Community-rated caiTiers pa1iicipating in the FEHBP ai·e subject to vai·ious federal, state and
local laws, regulations, and ordinances. While most caITiers ai·e subject to state jurisdiction,
many ai·e farther subject to the Health Maintenan ce Organization Act of 1973 (Public Law 93­
222), as ainended (i.e., many community-rated caiTiers ai·e federally qualified). In addition,
paiiicipation in the FEHBP subjects the caITiers to the Federal Employees Health Benefits Act
and implementing regulations promulgated by OPM.
FEHBP Contracts/M embers
The cha1i to the right shows the number of March 31
FEHBP contracts and members reported by
the Plan as of Mai·ch 31 for each contract 1,600
yeai· audited. 1,400
1,200
For contract yeai·s 2008, 2009 and 2011 , the
1,000
FEHBP should pay a market price rate,
800
which is defined as the best rate offered to
600
either of the two groups closest in size to the
FEHBP. For contract year 2012, the 400
premium rates charged to the FEHBP under 200
the MLR methodology ai·e to be developed in 0
2008 2009 2011 2012
accordance with OPM Rules and Regulations • Contracts 340 821 901 671
and the Plan's state-filed standai·d rating D Members 529 1,411 1,526 1, 100
methodology (or if the rating method does
not require state filing, the Plan's
1
documented and established rating methodology). All FEHBP pricing data are to be supported
by accurate, complete, and current documentation. In contracting with community-rated carriers,
OPM relies on carrier compliance with appropriate laws and regulations and, consequently, does
not negotiate base rates. OPM negotiations relate primarily to the level of coverage and other
unique features of the FEHBP.
The Plan has participated in the FEHBP since 2007, and provides health benefits to FEHBP
members in the following Pennsylvania counties: Adams, Berks, Blair, Bradford, Cambria,
Cameron, Carbon, Centre, Clearfield, Clinton, Columbia, Cumberland, Dauphin, Fulton,
Huntingdon, Jefferson, Juniata, Lackawanna, Lancaster, Lebanon, Lehigh, Luzerne, Lycoming,
Mifflin, Monroe, Montour, Northampton, Northumberland, Perry, Pike, Potter, Schuylkill,
Snyder, Somerset, Sullivan, Susquehanna, Tioga, Union, Wayne, Wyoming, York, and portions
of Bedford and Elk. The last audit of the Plan conducted by our office covered contract year
2010. That report indicated the Plan’s rating of the FEHBP was in accordance with applicable
laws, regulations, and OPM’s Rate Instructions to Community Rated Carriers (rate instructions).
The preliminary results of this audit were discussed with Plan officials at an exit conference and
in subsequent correspondence. A draft report was also provided to the Plan for review and
comment. The Plan’s comments were considered in preparation of this report and included, as
appropriate, in the Appendix.
2
II. OBJECTIVES, SCOPE, AND METHODOLOGY
Objectives
The primary objective of this performance audit is to determine whether the Plan is in
compliance with the provisions of its contract and the laws and regulations governing the
FEHBP. In contract years 2008, 2009, and 2011, the primary objective was to determine if the
Plan offered the FEHBP market price rates based on the rates given to the Similarly Sized
Subscriber Groups (SSSGs). In contract year 2012, the primary objective was to determine if the
Plan offered the FEHBP fair premium rates, based on its underwriting guidelines and OPM rules
and regulations. We also verified that the loadings to the FEHBP rates were reasonable and
equitable. Additional tests were performed to determine whether the Plan was in compliance
with the provisions of the laws and regulations governing the FEHBP.
Scope
FEHBP Premiums Paid to Plan
We conducted this performance audit in
accordance with generally accepted government $9
auditing standards. Those standards require that Millions
we plan and perform the audit to obtain $7
sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions $5
based on our audit objectives. We believe that
$3
the evidence obtained provides a reasonable
basis for our findings and conclusions based on $1
2008 2009 2011 2012
our audit objectives. Revenue $3.5 $7.6 $8.6 $7.8
This performance audit covered the FEHBP
premium rates developed and charged for contract years 2008, 2009, 2011, and 2012. For these
years, the FEHBP paid approximately $27.5 million in premiums to the Plan, as shown on the
chart above. The audit did not include tests of the Plan’s 2012 MLR calculation which will
remain subject to future audit.
OIG audits of community-rated carriers are designed to test carrier compliance with the FEHBP
contract, applicable laws and regulations, and OPM’s rate instructions. These audits are also
designed to provide reasonable assurance of detecting errors, irregularities, and illegal acts.
We obtained an understanding of the Plan’s internal control structure, but we did not use this
information to determine the nature, timing, and extent of our audit procedures. However, the
audit included such tests of the Plan’s rating system and such other auditing procedures
considered necessary under the circumstances. For contract years 2008, 2009, and 2011, our
review of internal controls was limited to the procedures the Plan has in place to ensure that:
• The appropriate SSSGs were selected;
3
• the rates charged to the FEHBP were the market price rates (i.e., equivalent to the best
rate offered to the SSSGs); and
• the loadings to the FEHBP rates were reasonable and equitable.
For contract year 2012, our review of internal controls was limited to the procedures the Plan has
in place to ensure that the rates charged the FEHBP are developed in accordance with the Plan’s
standard rating methodology and the claims, factors, trends, and other related adjustments are
supported by accurate, complete and current source documentation.
In conducting the audit, we relied to varying degrees on computer-generated billing, enrollment,
and claims data provided by the Plan. We did not verify the reliability of the data generated by
the various information systems involved. However, nothing came to our attention during our
audit testing utilizing the computer-generated data to cause us to doubt its reliability. We believe
that the available data was sufficient to achieve our audit objectives. Except as noted above, the
audit was conducted in accordance with generally accepted government auditing standards,
issued by the Comptroller General of the United States.
The audit fieldwork was performed at the Plan’s office in Danville, Pennsylvania during July
2013. Additional audit work was completed at our offices in Cranberry Township, Pennsylvania
and Jacksonville, Florida.
Methodology
For contract years 2008, 2009, and 2011, we examined the Plan’s federal rate submissions and
related documents as a basis for validating the market price rates. In addition, we examined the
rate development documentation and billings to other groups, such as the SSSGs, to determine if
the market price was actually charged to the FEHBP.
For contract year 2012, we examined the Plan’s standard rating methodology as a basis for
validating its federal rate submissions and related documents. In addition, we verified that the
factors, trends, and other related adjustments used to determine the FEHBP premium rates were
supported by accurate, complete and current source data.
We also examined claim payments to verify that the pricing data used to develop the FEHBP
rates was accurate, complete and valid. Finally, we used the contract, the Federal Employees
Health Benefits Acquisition Regulations, and the rate instructions to determine the propriety of
the FEHBP premiums, and the reasonableness and acceptability of the Plan’s rating system.
To gain an understanding of the internal controls in the Plan’s rating system, we reviewed the
Plan’s rating system policies and procedures, interviewed appropriate Plan officials, and
performed other auditing procedures necessary to meet our audit objectives.
4
III. AUDIT FINDINGS AND RECOMMENDATIONS
Premium Rate Review
1. Defective Pricing $603,442
The Ce1iificates of Accurate Pricing the Plan submitted for contract years 2008, 2011 , and
201 2 were defective. In accordance with federal regulations, the FEHBP is therefore due a
rate reduction for these years. Application of the defective pricing remedy shows that the
FEHBP is entitled to a premium adjustment totaling $603,442 (see Exhibit A). We found that
the FEHBP rates were developed in accordance with applicable laws, regulations, and the rate
instructions in contract year 2009.
For contract years 2008, 2009, and 2011 , caITiers proposing rates to OPM were required to
submit a Ce1i ificate of Accurate Pricing celiifying that the proposed subscription rates, subject
to adjustments recognized by OPM, are market price rates. OPM regulations refer to a market
price in conjunction with the rates offered to an SSSG. SSSGs are the Plan's two employer
groups closest in size to the FEHBP. If it is found that the FEHBP was charged higher than
the market price rate (i.e., the best rate offered to an SSSG), a condition of defective pricing
exists, requiring a downward adjustment of the FEHBP premiums to the equivalent market
price rate.
For contract year 2012, MLR Pilot Program caITiers proposing rates to OPM are required to
submit a Ce1i ificate of Accurate Pricing (MLR methodology) ce1i ifying that the cost or
pricing data submitted to OPM in suppo1i of the FEHBP rates are accurate, complete and
cmTent as of the date of the ce1i ificate. If it is found that the FEHBP was charged higher rates
due to inaccurate, incomplete or non-cmTent data, a condition of defective pricing exists,
requiring a downward adjustment of the FEHBP premiums.
The FEHBP was rated usin Class methodology for conti·act year
2008, and the Plan selected as SSSGs. We disagree
with the Plan's selections and chose
- as the con ect SSSGs because they were closer in subscriber size to the FEHBP.
Our analysis ~d to the SSSGs shows that - received a - percent
discount a n d - received - percent discount. The FEHBNid not
receive a discount. Since the FEHBP is entitled to a discoun~ivalent to the largest
discount given to an SSSG, we applied- discount of - percent to our audited
FEHBP rates.
Our analysis of the FEHBP rates found that the Plan applied discretionaiy underwriting
adjustments of - and- to the high and standard option rates, respectively. We
removed the unde1writing adjustment when developing our audited FEHBP rates.
5
As a result of our audit adjustments, we determined that the FEHBP was overcharged
$146,529 for contract year 2008 (see Exhibit B).
Plan’s Comments (see Appendix):
The Plan does not dispute our audited SSSG selections.
The Plan agrees that a discount was applied to the SSSGs; however, the Plan disagrees with
percent discount identified in our audit. The Plan claims that received a
discretionary underwriting load of for the high option, and a discretionary
underwriting discount of for the standard option. In its response to the draft report,
the Plan re-calculated discretionary underwriting factors by removing broker
commissions. The Plan applied these factors in their re-calculated FEHBP rate development
model. Based on their calculations, the Plan believes the overcharge is $117,416 for contract
year 2008.
OIG’s Response to the Plan’s Comments:
We disagree with the Plan’s analysis. The Plan did not provide support for the removal of the
broker commission from rate development. Further, the method by which the Plan
applied re-calculated discretionary underwriting factors to the FEHBP’s rates is
incorrect. SSSG discounts are calculated by comparing the corrected rates to the actual billed
rates. The resulting weighted-average SSSG discount is applied to the FEHBP’s line 5 rates.
We continue to believe that our calculations reflect the correct FEHBP rates and that the
FEHBP was overcharged $146,529 for contract year 2008.
2011
The FEHBP was rated using an Adjusted Community Rating (ACR) methodology for contract
year 2011, and the Plan selected as
SSSGs. We agree with these selections. The Plan did not apply an SSSG discount to the
FEHBP rates and neither SSSG received a discount.
Our analysis of the FEHBP rates found that the Plan charged the FEHBP a loading for state-
mandated coverage of medically necessary services and therapies for the diagnosis and
treatment of Autism Spectrum Disorder (ASD). The FEHBP has consistently provided
medically necessary services for enrollees as part of its OPM-approved benefit package.
Therefore, the cost of allowable ASD services is reflected in the claims experience used to
develop the FEHBP rates. As a result, we removed this loading from our audited FEHBP
rates.
The Plan also charged the FEHBP a loading related to mental health parity benefits. The Plan
stated the requirement for mental health parity became effective in 2011. After reviewing the
Plan’s FEHBP benefit brochures, we determined that a mental health parity requirement has
been in place for the FEHBP during all the experience period years. Therefore, the costs
associated with the mental health parity benefit are reflected in the claims experience used to
6
develop the FEHBP rates. As a result, we removed this loading from our audited FEHBP
rates.
The Plan added a percent and a percent loading to the FEHBP medical and
prescription drug benefit changes, respectively. These loadings were applied to both
experience periods and represent a significant increase in the FEHBP’s benefit adjustment
factors. The Plan stated the charges were a risk adjustment for the change in enrollment in
2010. We determined this risk adjustment factor is not appropriate and removed these
loadings in developing our audited FEHBP rates.
Per the Plan’s policies and procedures, additional audit adjustments were made to the FEHBP
rates which reduced the total overcharge to the FEHBP rates. The net result of our audit
adjustments is that the FEHBP was overcharged $370,374 for contract year 2011
(see Exhibit B).
Plan’s Comments (see Appendix):
The Plan agrees with our finding.
2012
The FEHBP was rated using an ACR methodology for contract 2012. The Plan charged the
FEHBP a loading for state-mandated coverage of medically necessary services and therapies
for the diagnosis and treatment of ASD. The FEHBP has consistently provided medically
necessary services for enrollees as part of its OPM-approved benefit package. Therefore, the
cost of allowable ASD services are reflected in the claims experience used to develop the
FEHBP rates. As a result, we removed this loading from our audited FEHBP rates.
The Plan also charged the FEHBP a loading related to mental health parity benefits. The Plan
stated the requirement for mental health parity became effective in 2011. After reviewing the
Plan’s FEHBP benefit brochures, we determined that a mental health parity requirement has
been in place for the FEHBP during all the experience period years. Therefore, the costs
associated with the mental health parity benefit are reflected in the claims experience used to
develop the FEHBP rates. As a result, we removed this loading from our audited FEHBP
rates.
The Plan applied a discretionary underwriting load of percent to the FEHBP rates. This
adjustment represents a surcharge to the FEHBP rates. Per the rate instructions, OPM will not
accept surcharges to the FEHBP rates. As a result, we removed this surcharge from our
audited FEHBP rates.
Per the Plan’s policies and procedures, additional audit adjustments were made to the FEHBP
rates which reduced the total overcharge to the FEHBP. The net result of our audit
adjustments is that the FEHBP was overcharged $86,539 for contract year 2012
(see Exhibit B).
7
Plan’s Comments (see Appendix):
The Plan agrees with our finding.
Recommendation 1
We recommend that the contracting officer require the Plan to return $603,442 to the FEHBP
for defective pricing in contract years 2008, 2011, and 2012.
2. Lost Investment Income $48,687
In accordance with FEHBP regulations and the contract between OPM and the Plan, the
FEHBP is entitled to recover lost investment income on the defective pricing findings. We
determined the FEHBP is due $48,687 for lost investment income, calculated through
April 30, 2014 (see Exhibit C). In addition, the FEHBP is entitled to lost investment income
for the period beginning May 1, 2014, until all defective pricing amounts have been returned
to the FEHBP.
FEHBAR 1652.215-70 provides that, if any rate established in connection with the FEHBP
contract was increased because the carrier furnished cost or pricing data that was not
complete, accurate, or current as certified in its Certificate of Accurate Pricing, the rate shall
be reduced by the amount of the overcharge caused by the defective data. In addition, when
the rates are reduced due to defective pricing, the regulation states that the government is
entitled to a refund and simple interest on the amount of the overcharge from the date the
overcharge was paid to the carrier until the overcharge is liquidated.
Our calculation of lost investment income is based on the United States Department of the
Treasury’s semiannual cost of capital rates.
Plan’s Comments (see Appendix):
The Plan acknowledges its obligations with respect to lost investment income; however, the
Plan believes the correct calculation for this figure through December 31, 2013 to be $39,496.
OIG’s Response to the Plan’s Comments:
We continue to maintain the FEHBP is due lost investment income in the amount of $48,687,
calculated through April 30, 2014.
Recommendation 2
We recommend that the contracting officer require the Plan to return $48,687 to the FEHBP
for lost investment income, calculated through April 30, 2014. We also recommend that the
contracting officer recover lost investment income on amounts due for the period beginning
May 1, 2014, until all defective pricing amounts have been returned to the FEHBP.
8
IV. MAJOR CONTRIBUTORS TO THIS REPORT
Community-Rated Audits Group
, Auditor-in-Charge
, Auditor
, Auditor
Chief
, Senior Team Leader
9
Exhibit A
Geisinger Health Plan
Summary of Questioned Costs
Defective Pricing Questioned Costs
Contract Year 2008 $146,529
Contract Year 2011 $370,374
Contract Year 2012 $86,539
Total Defective Pricing Questioned Costs: $603,442
Lost Investment Income: $48,687
Total Questioned Costs $652,129
Exhibit B
Page 1 of 2
Geisinger Health Plan
Defective Pricing Questioned Costs
2008 - High Option
Self Family
FEHBP Line 5 - Reconciled Rate
FEHBP Line 5 - Audited Rate
Bi-weekly Result
To Annualize:
March 31, 2008 Enrollment
Pay Periods 26 26
Subtotal $
Total 2008 High Option Defective Pricing Questioned Costs $148,945
2008 - Standard Option
Self Family
FEHBP Line 5 - Reconciled Rate $
FEHBP Line 5 - Audited Rate
Bi-weekly Result
To Annualize:
March 31, 2008 Enrollment
Pay Periods 26 26
Subtotal -
Total 2008 Standard Option Defective Pricing Questioned Costs -$2,416
Total 2008 Defective Pricing Questioned Costs $146,529
Exhibit B
Page 2 of 2
Geisinger Health Plan
Defective Pricing Questioned Costs
2011
Self Family
FEHBP Line 5 - Reconciled Rate
FEHBP Line 5 - Audited Rate
Bi-weekly Result
To Annualize:
March 31, 2011 Enrollment
Pay Periods 26 26
Subtotal
Total 2011 Defective Pricing Questioned Costs $370,374
2012
Self Family
FEHBP Line 5 - Reconciled Rate
FEHBP Line 5 - Audited Rate
Bi-weekly Result
To Annualize:
March 31, 2012 Enrollment
Pay Periods 26 26
Subtotal
Total 2012 Defective Pricing Questioned Costs $86,539
Total Defective Pricing Questioned Costs $603,442
EXHIBIT C
Geisinger Health Plan
Lost Investment Income
As of
Year 2008 2009 2010 2011 2012 2013 April 30, 2014 Total
Audit Findings:
1. Defective Pricing $146,529 $0 $0 $370,374 $86,539 $0 $0 $603,442
Totals (per year): $146,529 $0 $0 $370,374 $86,539 $0 $0 $603,442
Cumulative Totals: $146,529 $146,529 $146,529 $516,903 $603,442 $603,442 $603,442
Avg. Interest Rate (per year): 4.938% 5.250% 3.188% 2.563% 1.875% 1.563% 2.125%
Interest on Prior Years Findings: $0 $7,693 $4,671 $3,755 $9,692 $9,429 $4,274 $39,514
Current Years Interest: $3,617 $0 $0 $4,745 $811 $0 $0 $9,173
Total Cumulative Interest Calculated
Through December 31, 2013: $3,617 $7,693 $4,671 $8,500 $10,503 $9,429 $4,274 $48,687
February 20, 2014
Chief, Community – Rated Audits Group
U.S. Office of Personnel Management
Office of the Inspector General
800 Cranberry Woods Drive
Suite 270
Cranberry Township, Pennsylvania 16066
Re: Geisinger Health Plan Response to Draft Report No. 1C-GG-00-13-063
Dear
Geisinger Health Plan (“GHP”) is in receipt of the above referenced draft report dated January 8, 2014
(the “Report”) issued by the Office of the Inspector General of the U.S. Office of Personnel Management
(“OPM”). GHP’s response to the Report is detailed below along with corresponding enclosed exhibits.
We understand that OPM considers this response to be part of OPM’s fact finding process, and as such
not releasable under the terms of the Freedom of Information Act.
Defective Pricing for Contract Year 2008
• GHP does not dispute OPM’s findings on the selection of the SSSG’s.
• GHP agrees that a discount was applied to those accounts. Our analysis shows that
received underwriting discretion rate load of for the high option
(Exhibit A-1) and a discount of for the standard option (Exhibit A-2). However, GHP’s
audited rates (Exhibit A-3) are slightly higher than OIG’s audited results (Exhibit A-4).
• GHP agrees with the applied discretionary underwriting adjustments of and to the
FEHBP’s high and standard rates, respectively, and also removed those underwriting
adjustments.
• As a result of these audit adjustments, GHP acknowledges there was an overcharge to the
FEHBP, but believe that overcharge to be $117,416 for contract year 2008 (Exhibit B).
• The following Exhibits will demonstrate the results:
o Exhibit A-1 High Opt – GHP Audit);
o Exhibit A-2 Low Opt – GHP Audit);
o Exhibit A-3 (FEHBP 2008 High Low GHP Audit);
o Exhibit A-4 (2008 FEHBP OIG Audit)
/GeisingerHealthPlan
100 North Academy Avenue · Danville, PA 17822-3251
Tel. 570-214-3666
Defective Pricing for Contract Years 2011 and 2012 - Autism Coverage
• GHP does not dispute the audit finding for both contract years 2011 and 2012.
GHP acknowledges there was an overcharge to the FEHBP of $370,374 for contract year 2011 and
$86,539 for contract year 2012.
Lost Investment Income
GHP acknowledges its obligations with respect to lost investment income; however, GHP believes the
correct calculation for this figure through December 31, 2013 to be $39,496
Exhibit B shows the reconciled and audited rates of OPM and GHP along with interest.
GHP acknowledges the issues raised in the Report by OPM and agrees to address these issues on a going
forward basis.
Please contact me if you have any questions.
Sincerely,
Vice President/Controller
Geisinger Health Plan
100 North Academy Ave.
Danville, PA 17822
*Geisinger Health Plan refers collectively to itself and its affiliates, Geisinger Choice and Geisinger Health Options.
/GeisingerHealthPlan
100 North Academy Avenue · Danville, PA 17822-3251 Place document identifier here
Tel. 570-214-3666